Schools trust The Kamehameha Schools reported its first annual loss in more than two decades, reflecting the post-Sept. 11 downturn in the nation's financial markets.
suffers net loss
Kamehameha Schools
outperforms post-9/11
markets but ends the
year $89 million short
By Rick Daysog
rdaysog@starbulletin.com
But the charitable trust also said it increased spending on its educational programs by $17 million to a record $223 million.
In its annual report released yesterday, the Kamehameha Schools said it lost $89 million for its fiscal year ending June 30, 2002, compared to a net income of $690 million for the year-earlier period.
The 12-month loss is the first recorded by the estate since the late 1970s, when the trust was building the Royal Hawaiian Shopping Center in Waikiki.
It comes at a time when many of the large local pension funds and endowments have suffered comparable -- if not more severe -- losses.
As a result of the deficit, the estate's endowment portfolio had a market value of about $5.4 billion, down from $5.75 billion in the year-earlier period.
The estate said it managed to outperform the major financial markets.
The loss -- which translates into a negative return of 0.65 percent -- compares with a 10 percent decrease in the Dow Jones Industrial Average and an 18 percent drop in the broader S&P 500 index, the trust said.
"Given the volatility of the stock market and strained financial climate of the world, Kamehameha Schools did very well," said Hamilton McCubbin, the estate's chancellor and chief executive officer. "Our investment performance in support of our spending target for the same period was remarkable.
"A slightly negative performance in any given 12-month period should not be disruptive."
The estate attributed the deficit to its investments in marketable securities, which includes stocks, index funds, bonds, and other generally conservative investments. The trust recorded a net realized and unrealized loss of $228.9 million from those investments during the past fiscal year.
The trust -- the state's largest private landowner -- said it offset some of the losses with the sale of its remaining 5.5 million share interest in the Goldman Sachs & Co. investment banking firm and the sale of several mainland properties.
The Goldman Sachs deal netted about $500 million.
McCubbin said the trust is in no danger of making cuts to its educational programs. In fact, the modest investment decline allowed the estate to continue its ambitious plan to expand its reach within the Hawaiian community. During the past year, the estate expanded its preschool programs to serve more than 1,000 3- and 4-year-old children at 31 locations on five islands and began high school classes at its newly completed Maui and Big Island campuses.
McCubbin also noted that the estate played a leadership role in the passing of state legislation that would allow the trust and other nonprofits to partner with the Department of Education to convert public schools into charter schools.
Under the plan, the trust could better serve communities with a large Hawaiian population without having to build new schools in those districts.
"Kamehameha Schools is about education of native Hawaiians," McCubbin said. "Our spending on education has never been higher, which made fiscal 2002 a very good year."
Kamehameha Schools archive